ABC Chartered Accountants

XYZ Pvt. Ltd.

Statutory Audit for the year ended 31st March , 2020

Area : Borrowings and Interest

Work performed :
1 Ledger dumps were obtained from the client for the financial year ending 31st March 2020.
2 Samples were selected on judgemental basis.
3 Invoices and other realted supporting documents were obtained from the client for the selected samples
4 Test of details was performed for the selected samples.
5 Observations made were noted, and communicated to the client.

Substantive Procedures Undertaken :

1 Summarize and test debt covenants
2 Loan payment and interest amortization
3 Determine if all debt is classified appropriately (as current or noncurrent)
4 Compute interest expense and accrued interest
5 Agree the end-of-period balances in the general ledger to the amortization schedules
6 Confirm all significant debt with lenders
7 Collateral/Security
8 Market interest rate referencing

Conclusion :-
The account balances have been verified, and are free from material misstatements.
d Accountants

t for the year ended 31st March , 2020

wings and Interest

r dumps were obtained from the client for the financial year ending 31st March 2020.
es were selected on judgemental basis.
es and other realted supporting documents were obtained from the client for the selected samples.
f details was performed for the selected samples.
vations made were noted, and communicated to the client.

ocedures Undertaken :
arize and test debt covenants
payment and interest amortization
mine if all debt is classified appropriately (as current or noncurrent)
ute interest expense and accrued interest
the end-of-period balances in the general ledger to the amortization schedules
m all significant debt with lenders
eral/Security
t interest rate referencing

ances have been verified, and are free from material misstatements.
ABC Chartered Accountants
XYZ Pvt. Ltd.
Statutory Audit for the year ended 31st March , 2020

Trial Balance for the Financial Year 19-20

GL Code GL Name Debit Credit

1001 Equity - 500,000
1827 Provision for Bad Debts - 100,000
1002 Creditors - 5,750,000
2001 Buildings 107,000,000 -
1993 Inventory 8,000,000 -
2002 Office Equipments 24,000,000 -
2003 Debtors 12,000,000 -
2004 Bank 57,000,000 -
3001 Gross Profit - 146,100,000
3002 Interest Income - 100,000
4001 Legal & Professional Expense 5,600,000 -
4002 Printing & Stationery Expense 3,640,000 -
4003 Travelling Expenses 6,050,000 -
4004 Repairs & Maintenance 5,800,000 -
4008 Interest Expense 5,710,000 - To be tested
1836 Interest Outstanding - 2,250,000 To be tested
1060 Long Term Borrowings - 80,000,000 To be tested
Total 234,800,000 234,800,000
-
Loan Schedule & Notes

S. No. Long Term Borrowings Amt.

1 Term Loan 1 from BC Ltd. 50,000,000
2 Term Loan 2 from DK Ltd. 20,000,000
3 Term Loan 3 from BMC Ltd. 10,000,000
Total 80,000,000

EBITDA Computation
Particulars Rs
Gross Profit 146,100,000
Legal & Professional Expenses 5,600,000
Printing & Stationery Expenses 3,640,000
Travelling Expenses 6,050,000
Repairs & Maintenance 5,800,000
EBITDA 125,010,000
Interest Income 100,000
Interest Expense 5,710,000
PBT 119,400,000

NetWorth Computation
NetWorth
1 Equity 500,000
2 Reserves 119,400,000 Open reserves+current year profits tranf to BS
Total 119,900,000 0+119400000
year profits tranf to BS
 Financial Covenant Testing
Section Financial Covenant

1.1 Total Debt/ EBITDA not to exceed 2:1

Consolidated Total Debt

Consolidated Adjusted EBITDA
Actual
Numerator Denominator
Ratio
80,000,000 125,010,000 0.64

1.2 The Debt Equity Ratio should not exceed 1:1

Debt Equity Ratio = Total Debt

Total Equity

Actual
Numerator Denominator
Ratio
80,000,000 119,900,000 0.67
 Conclusion

In Compliance?
Yes

In Compliance?
Yes
 Section [B] Covenant
2.01 Quarterly Financial Statements
2.02 Year-End Financials
2.03 Litigation or Other Proceedings

2.04 Regulatory Filings- SEBI,

MCA, Regulatory Authorities
2.05 Events of Default, etc.

Negative Covenant Testing

Section Covenant
3.01 Indebtedness

3.02 Liens
3.03 Investments in Joint Ventures

3.04 Guarantee Obligations

3.05 Sale of Assets

3.07 Amendments of Documents

Relating to Indebtedness
 Summary
Due within 30 days after the close of the quarter.
Due within 45 days after the close the fiscal year.
Promptly upon, and in any event within five Business Days obtaining knowledge of any action, suit,
proceeding, governmental investigation, or arbitration against or affecting the Company or any of its
Subsidiaries
Promptly after the transmission thereof by Company or any of its Subsidiaries to the SEBI, MCA

Promptly upon, and in any event within five Business Days after, any Responsible Officer of Company
obtaining actual knowledge of any condition or event that constitutes an Event of Default or Potential Event of
Default.

Summary
(1) Maximum amount permitted for aggregate principal amount of Rs 90,000,000.
(2) Maximum permitted capital expenditure indebtedness not to exceed Rs 60,000,000.
Indebtedness secured by Liens - maximum permitted Rs 60,000,000.
(1) Maximum permitted investments in any person which Company or its Subsidiaries has an interest of 25%
or less not to exceed Rs 25,000,000.
Maximum permitted guarantee obligations not to exceed Rs 20,000,000.
(1) Maximum permitted aggregate fair value of assets sold withour Board approval not to exceed Rs
20,000,000.
Company shall not amend or otherwise change the terms of any debt agreement if the effect of such
amendment or change is to increase the interest rate, change any dates upon which payments of principal or
interest are due thereon, change any event of default or condition to an event of default with respect thereto,
change the redemption, prepayment provisions thereof, change any subordination provisions thereof, change or
add any collateral therefor, add any financial maintenance covenant thereto.
 Compliance
Yes
Yes
Yes

Yes

Yes

Compliance
Yes

Yes
Yes

Yes
Yes

Yes
 Purpose To test the debt repayment and amortization schedule.

Loan Summary
Face Value 50,000,000
Coupon Rate 10%
Amount Borrowed 50,000,000
Issuance Date 1-Jan-20
Maturity Date 1-Jan-25
Loan Period in Years 5
Number of Payments
per Year 4
Debt Issuance Cost -

Payments
Date Principal
1-Jan-20
1-Apr-20 2,500,000.00
1-Jul-20 2,500,000.00
1-Oct-20 2,500,000.00
1-Jan-21 2,500,000.00
1-Apr-21 2,500,000.00
1-Jul-21 2,500,000.00
1-Oct-21 2,500,000.00
1-Jan-22 2,500,000.00
1-Apr-22 2,500,000.00
1-Jul-22 2,500,000.00
1-Oct-22 2,500,000.00
1-Jan-23 2,500,000.00
1-Apr-23 2,500,000.00
1-Jul-23 2,500,000.00
1-Oct-23 2,500,000.00
1-Jan-24 2,500,000.00
1-Apr-24 2,500,000.00
1-Jul-24 2,500,000.00
1-Oct-24 2,500,000.00
1-Jan-25 2,500,000.00
mortization schedule.

Reconciliation to GL
Debt O/S

Payments Summary of
Total Interest
Interest Total Effective Interest Rate
Expense

1,250,000.00 3,750,000.00 1,250,000 10.00%

1,187,500.00 3,687,500.00 1,187,500 10.00%
1,125,000.00 3,625,000.00 1,125,000 10.00%
1,062,500.00 3,562,500.00 1,062,500 10.00%
1,000,000.00 3,500,000.00 1,000,000 10.00%
937,500.00 3,437,500.00 937,500 10.00%
875,000.00 3,375,000.00 875,000 10.00%
812,500.00 3,312,500.00 812,500 10.00%
750,000.00 3,250,000.00 750,000 10.00%
687,500.00 3,187,500.00 687,500 10.00%
625,000.00 3,125,000.00 625,000 10.00%
562,500.00 3,062,500.00 562,500 10.00%
500,000.00 3,000,000.00 500,000 10.00%
437,500.00 2,937,500.00 437,500 10.00%
375,000.00 2,875,000.00 375,000 10.00%
312,500.00 2,812,500.00 312,500 10.00%
250,000.00 2,750,000.00 250,000 10.00%
187,500.00 2,687,500.00 187,500 10.00%
125,000.00 2,625,000.00 125,000 10.00%
62,500.00 2,562,500.00 62,500 10.00%
 Per Debt GL Per Amortization Schedu Difference
50,000,000 50,000,000 -

Summary of Ending Debt Balance

Balance for Interest
Calculation
(50,000,000.00)
(47,500,000.00)
(45,000,000.00)
(42,500,000.00)
(40,000,000.00)
(37,500,000.00)
(35,000,000.00)
(32,500,000.00)
(30,000,000.00)
(27,500,000.00)
(25,000,000.00)
(22,500,000.00)
(20,000,000.00)
(17,500,000.00)
(15,000,000.00)
(12,500,000.00)
(10,000,000.00)
(7,500,000.00)
(5,000,000.00)
(2,500,000.00)
-
Particulars Amount
Paid -
Outstanding 1,250,000
Interest Expense 1,250,000
 Purpose To test the debt repayment and amortization schedule.

Loan Summary
Face Value 32,000,000.00
Coupon Rate 14%
Amount Borrowed 32,000,000.00
Issuance Date 1-Jan-17
Maturity Date 1-Jan-25
Loan Period in Years 8 32
Number of Payments
per Year 4 Quaterly
Debt Issuance Cost -

Payments
Date Principal Interest
1-Jan-17
1-Apr-17 1,000,000 1,120,000
1-Jul-17 1,000,000 1,085,000
1-Oct-17 1,000,000 1,050,000
1-Jan-18 1,000,000 1,015,000
1-Apr-18 1,000,000 980,000
1-Jul-18 1,000,000 945,000
1-Oct-18 1,000,000 910,000
1-Jan-19 1,000,000 875,000
1-Apr-19 1,000,000 840,000
1-Jul-19 1,000,000 805,000
1-Oct-19 1,000,000 770,000
1-Jan-20 1,000,000 735,000
1-Apr-20 1,000,000 700,000
1-Jul-20 1,000,000 665,000
1-Oct-20 1,000,000 630,000
1-Jan-21 1,000,000 595,000
1-Apr-21 1,000,000 560,000
1-Jul-21 1,000,000 525,000
1-Oct-21 1,000,000 490,000
1-Jan-22 1,000,000 455,000
1-Apr-22 1,000,000 420,000
1-Jul-22 1,000,000 385,000
1-Oct-22 1,000,000 350,000
1-Jan-23 1,000,000 315,000
1-Apr-23 1,000,000 280,000
1-Jul-23 1,000,000 245,000
1-Oct-23 1,000,000 210,000
1-Jan-24 1,000,000 175,000
1-Apr-24 1,000,000 140,000
1-Jul-24 1,000,000 105,000
1-Oct-24 1,000,000 70,000
1-Jan-25 1,000,000 35,000
 Reconciliation to GL Per Debt GL Per Amortization Sched

Debt O/S 20,000,000 20,000,000

Summary of Ending Debt Balance

Total Interest Effective Interest Balance for Interest
Total
Expense Rate Calculation
(32,000,000)
2,120,000
### 1,120,000 14.00% (31,000,000)
2,085,000
### 1,085,000 14.00% (30,000,000)
2,050,000
### 1,050,000 14.00% (29,000,000)
2,015,000
### 1,015,000 14.00% (28,000,000)
1,980,000
### 980,000 14.00% (27,000,000)
1,945,000
### 945,000 14.00% (26,000,000)
1,910,000
### 910,000 14.00% (25,000,000)
1,875,000
### 875,000 14.00% (24,000,000)
1,840,000
### 840,000 14.00% (23,000,000)
1,805,000
### 805,000 14.00% (22,000,000)
1,770,000
### 770,000 14.00% (21,000,000)
1,735,000
### 735,000 14.00% (20,000,000)
1,700,000
### 700,000 14.00% (19,000,000)
1,665,000
### 665,000 14.00% (18,000,000)
1,630,000
### 630,000 14.00% (17,000,000)
1,595,000
### 595,000 14.00% (16,000,000)
1,560,000
### 560,000 14.00% (15,000,000)
1,525,000
### 525,000 14.00% (14,000,000)
1,490,000
### 490,000 14.00% (13,000,000)
1,455,000
### 455,000 14.00% (12,000,000)
1,420,000
### 420,000 14.00% (11,000,000)
1,385,000
### 385,000 14.00% (10,000,000)
1,350,000
### 350,000 14.00% (9,000,000)
1,315,000
### 315,000 14.00% (8,000,000)
1,280,000
### 280,000 14.00% (7,000,000)
1,245,000
### 245,000 14.00% (6,000,000)
1,210,000
### 210,000 14.00% (5,000,000)
1,175,000
### 175,000 14.00% (4,000,000)
1,140,000
### 140,000 14.00% (3,000,000)
1,105,000
### 105,000 14.00% (2,000,000)
1,070,000
### 70,000 14.00% (1,000,000)
1,035,000
### 35,000 14.00% -
 Particulars Amount
Paid 2,310,000 apr-19 to jan-20
Outstanding 700,000 Jan-20 to Mar-20
Interest Expense 3,010,000

Difference

-
r-19 to jan-20
n-20 to Mar-20
 Purpose To test the debt repayment and amortization schedule.

Loan Summary
Face Value 40,000,000.00

Coupon Rate 12%

Amount Borrowed 40,000,000.00
Issuance Date 1-Jan-14
Maturity Date 1-Jan-22
Loan Period in Years 8
Number of Payments
per Year 3 Every 4th month
Debt Issuance Cost -

Payments
Date Principal Interest
1-Jan-14
1-May-14 1,666,667 1,600,000
1-Sep-14 1,666,667 1,533,333
1-Jan-15 1,666,667 1,466,667
1-May-15 1,666,667 1,400,000
1-Sep-15 1,666,667 1,333,333
1-Jan-16 1,666,667 1,266,667
1-May-16 1,666,667 1,200,000
1-Sep-16 1,666,667 1,133,333
1-Jan-17 1,666,667 1,066,667
1-May-17 1,666,667 1,000,000
1-Sep-17 1,666,667 933,333
1-Jan-18 1,666,667 866,667
1-May-18 1,666,667 800,000
1-Sep-18 1,666,667 733,333
1-Jan-19 1,666,667 666,667
1-May-19 1,666,667 600,000
1-Sep-19 1,666,667 533,333
1-Jan-20 1,666,667 466,667
1-May-20 1,666,667 400,000
1-Sep-20 1,666,667 333,333
1-Jan-21 1,666,667 266,667
1-May-21 1,666,667 200,000
1-Sep-21 1,666,667 133,333
1-Jan-22 1,666,667 66,667
dule.

Per Amortization
Reconciliation to GL Per Debt GL Schedule
Debt O/S 10,000,000 10,000,000

nts Summary of Ending Debt Balance

Effective Interest Balance for Interest
Total Total Interest Expense
Rate Calculation
(40,000,000)
3,266,667
### 1,600,000.00 16.00% (38,333,333)
3,200,000
### 1,533,333.33 16.00% (36,666,667)
3,133,333
### 1,466,666.67 16.00% (35,000,000)
3,066,667
### 1,400,000.00 16.00% (33,333,333)
3,000,000
### 1,333,333.33 16.00% (31,666,667)
2,933,333
### 1,266,666.67 16.00% (30,000,000)
2,866,667
### 1,200,000.00 16.00% (28,333,333)
2,800,000
### 1,133,333.33 16.00% (26,666,667)
2,733,333
### 1,066,666.67 16.00% (25,000,000)
2,666,667
### 1,000,000.00 16.00% (23,333,333)
2,600,000
### 933,333.33 16.00% (21,666,667)
2,533,333
### 866,666.67 16.00% (20,000,000)
2,466,667
### 800,000.00 16.00% (18,333,333)
2,400,000
### 733,333.33 16.00% (16,666,667)
2,333,333
### 666,666.67 16.00% (15,000,000)
2,266,667
### 600,000.00 16.00% (13,333,333)
2,200,000
### 533,333.33 16.00% (11,666,667)
2,133,333
### 466,666.67 16.00% (10,000,000)
2,066,667
### 400,000.00 16.00% (8,333,333)
2,000,000
### 333,333.33 16.00% (6,666,667)
1,933,333
### 266,666.67 16.00% (5,000,000)
1,866,667
### 200,000.00 16.00% (3,333,333)
1,800,000
### 133,333.33 16.00% (1,666,667)
1,733,333
### 66,666.67 16.00% -
 Particulars Amount
Paid 1,150,000 Apr-19 to 1st jan 20

Difference Outstanding 300,000 1st jan-20 to Mar-20

- Interest Expe 1,450,000

150,000 Apr-19 In lthis installment Interest amount of apr is there

533,333 May-19 to Aug-19
466,667 Sep-19 to Dec-19
300,000 Jan-19 to Mar-19
r-19 to 1st jan 20

jan-20 to Mar-20 Proportionately shown as outstanding for 3 months

 Purpose To perform financial statement tie-out and test the entity's
debt rollforward.

Outstanding Debt Obligation 1-Apr-19

Debt Type/
Maturity Interest Rate Currency
Identifier

As per Schedule As per Schedule PY

Borrowings
Term Loan 1 from BC Ltd. 1/1/2025 10.0% Rs
Term Loan 2 from DK Ltd. 1/1/2025 14.0% Rs
Term Loan 3 from BMC Ltd. 1/1/2022 12.0% Rs
Totals
Short-term borrowings
Revolver Borrowings
Totals
Totals
out and test the entity's

1-Apr-19 Movements During the Year 31-Mar-20

Opening Face Opening Book Additions to Translation Closing Book

Payments
Value Value Face Value Rate Utilized Value

PY PY

- - NA 50,000,000
24,000,000 24,000,000 - 4,000,000 NA 20,000,000
15,000,000 15,000,000 - 5,000,000 NA 10,000,000
39,000,000 39,000,000 - 9,000,000 - 80,000,000

NA -
- - - - - -
 31-Mar-20
Current
portion of
Long Term
Long-Term
Debt

10,000,000 40,000,000
4,000,000 16,000,000
5,000,000 5,000,000
19,000,000 61,000,000

-
- -
 Purpose To Test the Outstanding Debt Balance via Confirmation Procedur

Selections/Debt Rollforward Information from the General Ledger

Curre Collateral, if
S. No Debt Debt Category
ncy any

1 50,000,000 LTB Rs
2 20,000,000 LTB Rs
3 10,000,000 LTB Rs
Total 80,000,000

As Per Confirmation

Curre Collateral, if
S. No Debt Debt Category
ncy any

1 50,000,000 LTB Rs
2 20,000,000 LTB Rs
3 10,000,000 LTB Rs
Total 80,000,000

Testing and Conclusions

Curre Collateral, if
S. No Debt Debt Category
ncy any

1 TRUE TRUE Rs
2 TRUE TRUE Rs

3 TRUE 1 Rs
 Most
Recent Additions
Interest Ending Balance
Maturity Date Agreement/ During the Repayments
Rate as of 3/31/2020
Amendmen Year
t
10.00% 1-Jan-25 NA 50,000,000 - 50,000,000
14.00% 1-Jan-25 NA - 4,000,000 20,000,000
12.00% 1-Jan-22 NA - 5,000,000 10,000,000
- 50,000,000 9,000,000 80,000,000

Most
Recent Additions
Interest Ending Balance
Maturity Date Agreement/ During the Repayments
Rate as of 3/31/2020
Amendmen Year
t
10.00% 1-Jan-25 NA 50,000,000 - 50,000,000
14.00% 1-Jan-25 NA - 4,000,000 20,000,000
12.00% 1-Jan-22 NA 5,000,000 10,000,000
- 80,000,000

Most
Recent Additions
Interest Ending Balance
Maturity Date Agreement/ During the Repayments
Rate as of 3/31/2020
Amendmen Year
t

100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

Remarks
Interest Expense

Particulars Term Loan 1 Term Loan 2 Term Loan 3 Total

from BC Ltd. from DK Ltd. from BMC Ltd.
Interest exp for FY-19 1,250,000 3,010,000 1,450,000 5,710,000
Outstanding 1,250,000 700,000 300,000 2,250,000
Total 2,500,000 3,710,000 1,750,000 7,960,000

Particulars As Per As Per GL Difference

Working
Interest Expense 5,710,000 5,710,000 -
Interest Outstanding 2,250,000 2,250,000 -